Money Laundering vulnerabilities of Free Trade Zones

Free trade zones (FTZs) are designated areas within countries that offer a free trade environment with a minimum level of regulation. The number of FTZs have increased rapidly in recent years, today there are approximately 3 000 FTZs in 135 countries around the world.

FTZs offer many incentives and benefits to the companies that operate within it, such as the exemption from duty and taxes and simplified administrative procedures. However, the absence of strict regulations and transparency of the FTZs which is beneficial for legitimate businesses, also make them highly attractive for illicit actors who take advantage of this relaxed oversight to launder the proceeds of crime and finance terrorism.

Through a series of cases studies, this report aims to illustrate the ways in which FTZs can be misused for money laundering and terrorist financing purposes.

The objectives of this typology report are to:

• Understand the size, scope, definition and role of FTZs worldwide and their role in the global economy.

• Identify the money laundering and terrorist financing threats and vulnerabilities associated with FTZs.

• Identify the methods used to move and launder the proceeds the crime and/or finance terrorism using FTZs.

• Suggest areas for further consideration to improve the anti-money laundering and counter terrorist financing (AML/CFT) framework concerning FTZs

For more information about this report, please contact the FATF Secretariat at : contact@fatf-gafi.org.